Big Pharma pushes repeal of drug price negotiation that lowers costs for consumers

The pharmaceutical industry and its Republican allies are pushing to repeal provisions in President Joe Biden’s Inflation Reduction Act that authorize the federal government to negotiate with drugmakers to lower prescription drug prices for Medicare Part D recipients. In a new ad campaign, Pharmaceutical Research and Manufacturers of America (PhRMA) cites research it funded to claim that lower drug prices result in higher costs for older Americans.

The trade group, which has an annual budget of more than $500 million, is running online ads telling the public that the 2022 law’s provisions to lower costs for both the government and Medicare beneficiaries will actually raise costs for consumers. “Seniors will likely see higher medicine costs because of the price setting provisions in the IRA, with more changes to come,” one ad warns. Those who click on the ads are taken to a page on PhRMA’s website that claims that “most Part D patients are not expected to experience any cost savings from price setting in 2026. Instead, millions are likely to face increased costs” and urges lawmakers to “mitigate the harms of the IRA’s price setting process.”

Medicare drug price negotiation is broadly popular, with 85% of registered voters saying they support it, according to a September 2024 KFF Health poll. 

Republicans in Congress, who will hold narrow majorities in both chambers starting in January, unanimously opposed the Inflation Reduction Act, and many have been pushing for its full repeal. The Republican Study Committee’s fiscal year 2025 budget plan calls for repeal of the law’s drug price provisions, as does the Heritage Foundation’s Project 2025 blueprint for President-elect Donald Trump’s administration.

The law’s provisions include a $2,000 annual cap on out-of-pocket copayments for prescription drugs for Medicare Part D subscribers starting in 2025; a $35 monthly out-of-pocket cap on their insulin costs; and a requirement that the Centers for Medicare and Medicaid Services negotiate with pharmaceutical companies to lower prices on many of the most commonly used and expensive medications for the program starting in 2026. 

The first 10 negotiated lower drug prices alone are expected to save millions of beneficiaries a total of about $1.5 billion, according to CMS, and to save the government about $6 billion. According to an October 2024 report by the Department of Health and Human Services, about 4.6 million Medicare Part D enrollees would have reached the $2,000 out-of-pocket cap by June 30, 2024, if it had been in effect, paying no additional cost-sharing for the rest of the year.

The group’s claim that the law will result in higher costs relies on a actuarial study commissioned from the consulting firm Milliman by PhRMA. That report estimated that “3.5 million Part D patients taking a medicine subject to an MFP [maximum fair price agreement] could see higher out-of-pocket costs in 2026,” and argues that the negotiated lower prices will increase out-of-pocket costs for beneficiaries with copays “by slowing progression towards the maximum out-of-pocket limit.” The study also predicted that millions of beneficiaries would see savings or no change due to the lower negotiated prices. 

Patients For Affordable Drugs, an advocacy group working to lower drug prices, and Protect Our Care, a nonprofit that works to expand access to affordable health care, dispute PhRMA’s claims and Milliman’s methodology.

“The PhRMA/Milliman study cherry-picks two provisions from the IRA and effectively assumes that only those two go into effect,” the groups said in an open letter. “It uses flawed assumptions and reasoning and is completely misleading. It is a tactic PhRMA is using to attempt to protect its massive profits by undermining the Medicare Drug Price Negotiation Program, which is overwhelmingly popular with voters across the political spectrum. It absurdly assumes that Medicare Part D beneficiaries use only one drug at a time. In fact, Part D beneficiaries filled between 4.2 and 5.7 prescriptions per month.“

Even the conservative American Enterprise Institute noted in a July blog post that the assessment is based on questionable assumptions: “The Milliman actuaries assumed that the negotiated prices for these first ten drugs would be equal to the maximum allowable prices under the law, which are based on existing prices less discounts required by the IRA. If CMS is able to secure prices below the maximums allowed by the law, the study’s findings may no longer hold.”

“PhRMA is citing a misleading report that PhRMA paid for that was based on actuarial mathematical models,” Matthew Cortland, a senior fellow with the progressive think tank Data for Progress, said in an interview. “And they didn’t look at all of the provisions of the Inflation Reduction Act, relative to drugs. And when you look at them all and look at what’s actually happened, like HHS has done, you find out that the Inflation Reduction Act is helping people.”

PhRMA did not immediately respond to a request for comment.

“One thing that is very telling re: PhRMA is that they are fighting tooth and nail in court to try to stop negotiation,” Andrea Ducas, the vice president for health policy at the Center for American Progress, said in an email. “That should be all you need to know about how worried they are about profit loss and accordingly consumer cost savings.”

The PhRMA site also includes a long-standing industry talking point that if pharmaceutical companies’ massive profits are reduced by lower prices, they will choose to spend less money on research and development of future medications, leaving “hundreds of medicines at risk of not being developed” over the next 20 years.

A 2019 analysis by the nonpartisan Congressional Budget Office and the Joint Committee on Taxation, however, projected that legislation authorizing drug price negotiation would result in about eight fewer drugs developed over a decade and about 30 fewer medications over the subsequent decade. 

“I would point out that a lot of the riskiest, earliest-stage research is actually paid for by taxpayers through the National Institutes of Health,” Cortland said. “PhRMA is doing us all the great favor of pointing out how incredibly important it is that we have a strong NIH conducting a rigorous research program on behalf of the American taxpayer.” 

“Big drug companies are trying to protect their profits with scare tactics and lies,” Protect Our Care executive director Brad Woodhouse said in an emailed statement. “They have been ripping us off for years, and now they are fearmongering to move us backwards and raise costs on seniors. For too long, drug companies have had free rein to hike drug prices while lining the pockets of their CEOs and shareholders and forcing Americans to skip doses of life-saving medicines – and they continue to make record-breaking profits. But they won’t stop there – they are so greedy that they are kicking and screaming to save their ability to take advantage of hard-working families. The Inflation Reduction Act is saving people money, full stop.”